Swissquote Shares Downgraded On Valuation Concerns

Swissquote shares (SWX: SQN) are under scrutiny today following a downgrade by Kepler Cheuvreux from “Buy” to “Hold.”

The analyst cited concerns over the stock's “premium” valuation as the primary reason for the revised rating. Despite the downgrade, Kepler Cheuvreux raised its price target for Swissquote to CHF 510, up from CHF 415, a level that remains more than 8% below the current price action.

The downgrade arrives as Swissquote shares up trade near their 52-week high of CHF 576.50, reached last week.

This brings about a classic market dilemma: when does a stock's strong performance and positive momentum lead to a valuation that outpaces its fundamental justification? While Kepler Cheuvreux acknowledges Swissquote's strength by raising its price target, the downgrade to “Hold” suggests the current share price already incorporates this optimism, limiting near-term upside.

While the firm acknowledges the company's robust financial results, including a 24.44% increase in revenue to CHF 687.25 million and a 35.17% rise in earnings to CHF 294.17 million in 2024, the current share price may already reflect much of this positive momentum. Notably, the surge in net income from crypto assets, which increased by 353.2% to CHF 85.5 million in 2024, has contributed significantly to Swissquote's operating income.

This isn't the only analyst action weighing on Swissquote. Back in June, UBS downgraded the stock to “Sell,” citing concerns about a potential slowdown in trading and cryptocurrency activities, along with anticipated revenue pressure from decreased interest rates. These downgrades suggest a growing consensus among some analysts that Swissquote's growth may be facing headwinds.

However, Swissquote has also made strategic moves to bolster its market position. The acquisition of full ownership of the Yuh app in July, which initially boosted the stock price by 7%, demonstrates the company's commitment to expanding its digital service offerings and customer base. This acquisition could provide a buffer against potential slowdowns in other areas of the business.